Steps to Take to Stay on Top of Commercial Management in Contract

Steps to Take to Stay on Top of Commercial Management in Contract

The commercials in pre-contract need to be managed to ensure that the deal that is put in the front of the customer is one that will get sign off by their stakeholders. In your business, you will also want the comfort that the business case and the senior stakeholders will approve the contract prior to signing.

During the pre-contract or post-contract phase it is important that the correct requirements are also captured to enable the contract to function during its term. In case if there are parts which are new or existing that require a change this can be adopted through change control.

Understand the Customer Request

If the commercials are based around, for example, a given budget per country on a multiyear deal the customer has given specific boundaries, then the key commercials need to be based around this.

So, if your standard output taking into consideration take let say any volume spends based on tiers it may be over the actual value then it is unlikely that this will go down well with the customer.

Exchange Rate

By adding the current rate exchange rate against the pound given by your finance team this will help you to work out the differences in local currency. You may want to record the exchange rate used to agree with the customer if this will be subject to review in the future.

Service Credit Impact

During negotiations, a number of services credits may change up to the final version of the pre-contract. Keep the final figures of the items which attract the levels of service credits. If there is a ceiling figure, then try to keep within this take your eye off the ball and you could find this is increased or even doubled in some cases.

There may be service credits also due post-contract for example in an agile software development cycle where there is a failure to deliver each of the requirements as per contract then see what alternatives options are to reduce the impact on revenue.

Exit Commitments

On exit, and in line with any exit plan, are there any provisions in the contract that clearly expresses the way in which this would operate. If there is then it may have the full details including any revenues. The thing you want to avoid is to wait until you are in the exit phase to revise the commitments or commercials of each party. It is better to agree this earlier.

Freebie Impact

The commercials in a customer deal may have items like reduced rates or free days etc, the more reductions which are added all add up. If the items remain as is consider the actual commercials at this stage without the reductions to determine the difference from the original positions to the revised position. See if there is an alternative way to improve the profit margin.

Checks and Balances

There may be several different requirements that could impact the service in the contract for example, it is worth engaging the correct service delivery resource to review any standard or non-standard requirements. If your business signs up to something which can’t be delivered, or it is near impossible due to lack of expertise in a certain area then it is worth removing this part or find an alternative. Once this is complete the final checks can then can be carried out by legal with any gaps or inconsistencies that are needed for further clarity.

Commercial or Contract Resource

If your business does not have a dedicated individual for commercial or contract support, then this is likely this is where it is taking longer to conclude contracts.

The correct commercial or contract resource can be your single subject matter expertise that will handle not only the documents, it’s changes but will also assist with negotiations. They will also engage the key areas of the business to move forward any open items.

Where an organisation does this have this resource then it will need to maintain the business as usual work without creating any backlogs.

This is where your business will get an extra pair of hands to deal with a number of complex issues which may arise prior to presenting them to senior stakeholders.

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